SoftBank to trim Alibaba stake to 14.6%, poised to book $34B gain

Masayoshi Son famously built his war chest by pumping $20 million into Alibaba two decades ago. Over the years the Chinese e-commerce behemoth has become a way for the billionaire founder of SoftBank Group to generate liquidity. And now Son is ready to further cash in as he tries to raise capital to keep his Vision Fund investment powerhouse afloat.

SoftBank said Wednesday that it plans to sell about 242 million American depository receipts (ADRs) of Alibaba, which will bring its stake in the company down to 14.6% from 23.7% as of the end of June. The group estimated a roughly 4.6 trillion yen ($34 billion) pre-tax gain from the sale.

Alibaba’s stock is down 70% from an October 2020 peak that valued it at $307 per share. Investor confidence in China’s tech industry has yet to rebound from the slate of regulatory clampdowns that began about two years ago. The domestic tech market is further dampened by a slowing economy and COVID-related policy uncertainties.

Son’s move was expected. In February, an analyst from the investment bank Jefferies noted that SoftBank would need “$40 billion-45 billion of cash this year” if it were to sustain its startup investment pace and a program to buy back up to 1 trillion yen ($7.5 billion) of its shares. The analyst said at the time the Japanese tech conglomerate would likely further trim its stake in Alibaba in 2022.

Earlier this week, SoftBank revealed a record quarterly loss worth around 3.2 trillion yen ($24.5 billion). As my colleague Alex noted in his analysis, the firm has paid the price for betting on besieged companies like Didi. The Chinese ridesharing darling has lost tens of billions of dollars in market value since its initial public offering in July as it dealt with a series of regulatory troubles.